Regulators investigate HCA stock sale by Frist

Senate leader shed his shares during heavy insider trading

JONATHAN M. KATZ, Associated Press |
September 24, 2005

WASHINGTON - Federal prosecutors and the Securities and Exchange Commission are looking into Senate Majority Leader Bill Frist's sale of stock in HCA at a time when insiders at the hospital operating company were also selling off shares.

HCA, based in Nashville and founded by the Frist family, said Friday it had received a subpoena from prosecutors for the Southern District of New York, asking for documents the company believes are related to Frist's stock sale.

Prosecutors also have contacted the senator's office, Frist spokesman Bob Stevenson said. He said neither the senator nor his office had received a subpoena.

Frist, a Tennessee Republican, has been considered a potential presidential candidate in 2008. Aides say he sold his stock to avoid any appearance of a conflict of interest. Frist's office confirmed the SEC was looking into the sale.

"As with the SEC, the majority leader will provide the U.S. attorney's office with any information that it needs with respect to this matter," Stevenson said.

The SEC also contacted HCA Friday to informally request copies of the subpoenaed documents, company spokesman Jeff Prescott said. "We of course will comply with that request," he said.

Herb Haddad, a spokesman for the U.S. Attorney's Office in Manhattan, said the office had no comment on the matter. SEC spokesman John Nester declined to comment on whether the agency had contacted Frist's office.

David Becker, who was general counsel at the SEC from 2000 to 2002, noted that both Frist and HCA were being put under scrutiny.

In insider trading cases, "you connect the dots not by simply going from one dot to another but by starting at both dots and working toward the middle," Becker said. "The facts that are public don't come close to demonstrating wrongdoing. It's way too premature to have any judgment."

HCA, the nation's largest for-profit hospital company, was founded by Frist's father. His brother was formerly its CEO and chairman and remains on the board of directors.

Frist's sale came about two weeks before the company issued a disappointing earnings forecast that drove its stock price down almost 16 percent by mid-July.